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More Stable Sentiment Shores Up Antipodean FX, GBP Underperforms

FOREX
  • Diminishing geopolitical tensions have moderately bolstered risk sentiment to start the week with global indices in the green and higher beta currencies firmer in G10. Both AUD and NZD have risen around 0.4%, modestly extending the pullback from Friday’s sharp selloff.
  • Overall, the AUDUSD trend condition remains bearish, and the pair is trading close to key support at 0.6443, the Feb 13 low, which has recently been cleared. Scope remains seen for an extension towards 0.6339, the Nov 10 ‘23 low. Firm resistance is seen at 0.6532, the 50-day EMA.
  • The Japanese yen has had a subdued start to the week, however, continues to trade with a downward bias. USDJPY has matched the recent cycle highs at 154.79, however, low volumes capped topside momentum for the pair, as well as notable option expiries at the 155.00 mark.
  • We wrote last week that while the technical trend condition in USDJPY remains positive, the next phase of strength could be harder to come by without another major shift in Fed policy pricing, as positioning looks stretched and diplomatic blockers to potential intervention appear to peel away.
  • Elsewhere, GBP was a notable laggard on Monday, with EURGBP extending outperformance to trade fresh multi-month highs. The shift higher coincides with the confirmed close and break above the late March highs at the Friday close as well as the 200-dma at 0.8607, with momentum possibly picking up on the slippage through the 1.16 handle in GBP/EUR also - a cross closely watched by UK importers/exporters.
  • Eurozone flash PMIs will take focus on Tuesday and markets will most likely then turn their attention to the April inflation round, commencing next week. US GDP (Thursday) will be the highlight for the global calendar this week, with Fed speakers notably absent as the FOMC enter their pre-meeting media blackout period.
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